It's not exciting, but stocks stage modest climb

Stocks are moving in a very narrow range (less than 50 points on the Dow, well below the daily average swing of about 125 points), partly because bond yields are also moving in a very narrow range.

But watch the trend: There are still move stocks advancing than declining, and we once again we have closed at a historic high on the S&P 500.

So what, you say? You say it doesn't take much to close at a historic high? Friend, two weeks ago everyone was bemoaning we seemed stuck at 1,800. Now we are at 1,808 and traders are moaning, "Bob, this is really boring."

Really? I think it's amazing. I think it's amazing that the market may go sideways for a few days, but it doesn't go down.

The NASDAQ is at a 13-year high. Techs, financials, Industrials--all cyclicals--are market leaders.

As one trader pointed out to me: The markets are assimilating Friday's power move higher. Now that we have closed at a new historic high on the S&P, technicians will likely get even more bullish.

One sector that worries me: Energy, particularly Exploration & Production (E&P) stocks. The XOP peaked out in October and is now down 10 percent, while the market is near new highs.

It's a simple story: There is too much oil and gas and not enough demand. And the U.S. has now become a major energy exporter, thanks to the explosion of the shale business.

Even a cold snap, a big storm and a jump in natural gas prices aren't enough to bring the stocks up today.

Paul Sankey at Deutsche Bank has written extensively about the problem: Saudi Arabia is continuing to export oil into an over-supplied U.S. market. At the same time, the U.S. is exporting large amounts of oil, but if there continues to be large excess global refining capacity (and lower demand) that is going to choke off export growth.

Combine that with weaker U.S. demand, and you have a problem for the E&P group.

The hope, as Sankey has pointed out, is that European refiners will cut back on production. Maybe.

There is a second problem: There is no growth in U.S. refining capacity for the next five years, but oil production is growing rapidly. So the U.S. is becoming increasingly oversupplied. Will this result in less drilling? It certainly will if prices continue to drop. How much will it need to drop? West Texas crude is currently at about $97; Sankey thinks $75 a barrel is where supply will start to be constrained.